Can the new government revive project momentum?

As the new government assumes power, there is quite an agenda it requires to address to put the economy on track.
The pressure of elections has at least set the pace for delivery on the ground. Schemes announced and then monitored through PRAGATI and other mechanisms were planned to benefit all segments of society. Their completion marks the fulfilment of the commitment made by the erstwhile government. In 2018-19, project completions would be close to the peak completions of Rs 6.4 trillion seen in 2016-17.
Roads and railways have been the big drivers, followed by irrigation and real estate. According to CMIE, road projects worth Rs 756 billion were completed in 2018-19, thereby nearly doubling completions compared to the Rs 381 billion worth of projects completed in 2017-18.
In the case of railways, project completions have more than doubled from Rs 292 billion in 2017-18 to Rs 646 billion in 2018-19.
In real estate, introduction of RERA and punitive judicial orders have brought some order. Owing to these interventions in all likelihood, residential housing projects worth Rs 652 billion were completed in 2018-19 compared to Rs 341 billion in 2017-18. Besides, commercial complexes worth Rs 134 billion were completed in 2018-19.
With elections around the corner, irrigation had to show furious activity as well. Sure enough, projects saw a sharp jump in completion in
2018-19. Projects worth Rs 306 billion were completed during the year compared to Rs 22 billion the previous year.
Given that all initiatives of the government have failed to encourage private capital, it is no surprise to learn that government-owned projects accounted for 53.8 per cent of all completion during 2018-19. Even more worrisome is the fact that new investment proposals have been at the lowest over the past 14 years. The momentum that put India’s economy in a high growth orbit in 2004-05, which led to a pipeline of investment proposals to the tune of Rs 25 trillion a year from 2006-07 to 2011-12, has been elusive. The decline of investment proposals beginning with the deep dive in 2013-14 at Rs 10 trillion provided some hope in doubling to Rs 20 trillion in 2014-15 with the new government – but has since caved in, back to Rs 10 trillion. The public sector has taken a back seat and the private sector has remained shy.
With a larger borrowing programme, it is incumbent upon the new government to revive animal spirits to put the country on the road to economic growth.
The real-estate sector, meanwhile, has a new Goliath, Embassy, with a market cap of Rs 250 billion, standing among the likes of DLF (market cap: Rs 380 billion) at a higher level than Oberoi Realty and Godrej Properties. In the context of the corporatisation of the real-estate sector, the REIT instrument has been a great new accomplishment as it sets the tone for higher FDI flow into the sector. The sector ought to accelerate its Proptech quotient to continue to attract foreign capital and enhance project delivery of the highest standards.
Only an improvement in the economy can lift the clouds over real-estate momentum. Meanwhile the rainbow continues to be ‘affordable housing’, both for building contractors and developers.